How are the companies that Jim Collins chronicled in his 2001 mega-hit bestseller book “Good To Great” doing?
Recall the questions his book raised? Why some companies make the leap and others don’t?
How can good companies, mediocre companies, even bad companies achieve enduring greatness? … For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?
Collins identified eleven companies that had moved from good to great. Collins’ benchmark – cumulative stock returns that beat the general stock market by an average of seven times in fifteen years – implied that these companies were “Built To Last”. But were they?
Nucor (NYSE: NUE), the best company at harnessing culture and technology to produce low-cost steel, produced a stellar annual return on investment of 20.6% (from January 1, 2001 to March 20, 2009; includes dividends). The S&P 500 Index was down 6.4% per year over the same timeframe. So far so good - I mean so great! Nucor seems to be “Built To Last”!
What about the other ten? Well, not so great! And not even good! Just plain lousy!
- Abbott (NYSE: ABT) 2.6% annual ROI (price fell from $48.44 to $47.54; total dividends $12.51);
- Circuit City (NASDAQ: CTTYQ) –11.7% annual ROI (price fell from $16.06 to 0; total dividends $5.79; the company closed its doors in February);
- Fannie Mae (NYSE: FNM) –20.1% annual ROI (price fell from $86.75 to $0.70; total dividends $13.04);
- Gillette 5.0% annual ROI (Procter and Gamble (NYSE: PG) acquired Gillette in 2005 for $57 billion; price rose from $35.94 to $44.45; total dividends $9.24; assumes .975 share of PG per share of Gillette);
- Kimberly-Clark (NYSE: KMB) –1.4% annual ROI (price fell from $70.69 to $45.98; total dividends $16.79);
- Kroger (NYSE: KR) –2.7% annual ROI ( price fell from $27.63 to $20.71; total dividends $1.39);
- Altria (NSYE: MO) 1.2% annual ROI (price fell from $44.00 to $16.78; total dividends $31.85):
- Pitney Bowes (NYSE: PBI) –0.1% annual ROI (price fell from $33.13 to $21.84, total dividends $11.06);
- Walgreen Company(NYSE: WAG) –5.3% annual ROI (price fell from $41.81 to $24.29, total dividends $2.55);
- Wells Fargo (NYSE: WFC) –2.5% annual ROI (price fell from $27.84 to $13.99; total dividends $8.55.
Jim Collins makes a living teaching leaders throughout the corporate and social sectors. I hope they don’t pay too much, because they may not get a great return on their investment (sorry for the pun!). So much for Jim Collins' expertise on enduring great companies!
Collins' book, "Good To Great" has been a big rage. Over 3 million copies have been sold. Is the herd mentality at work here? I'm reminded by an old saying, "just because 99 out of 100 people think an idea is a good idea, that doesn't make it a good idea".
I paid $29.99 for this eight-year old book last month. Can I get my money back? I expect this book will be on the clearance table soon.
Perhaps Collins’ sequel will be “From Good To Great, To Bad To Gone”.
The Sacramento Executive